The All Share Index has peeked above the 24 000 level and only old bears like myself remain deeply suspicious about whether or not the worst is really over. Now, any forecast in this business has just exactly a 50% chance of being wrong and so far my views are proving to be right in that half. My difficulty with this market is that it is only the market which has any good news. Everywhere else there is almost no sign of economic recovery. It is of course true that markets usually run many months before the economy does, but in my view this downturn will be far deeper and much longer than most people hope for and therefore this run is a false start.
In the name of stimulus, governments in many countries have started or are accelerating programs of political allocation of resources. In the USA there are already cries for even more stimuli, because the first dollops of cash – with the notable exception of some smart fellows in Wall Street – have not done the job. Here in SA – despite the amazing strength of the rand indicating that there is a lot of money coming into the country – there is a winter of discontent. Notwithstanding the delight of a small segment of the motor industry which has been meeting the demand for two outrageously expensive and luxurious cars per minister (one per city), workers are understandably sympathetic with the looting, striking and rioting that has been taking place. There is great impatience with the state forever just promising “to listen to all stakeholders” when the problem is clear and obvious and not in need of any further discussion. People would like to have more money. Most of us are even prepared to work for it. But being socialist by nature and suspicious of free markets, the state’s response will surely be to play an even larger role in resource allocation. People who should know better are starting to condemn the idea that profits are important and it might not be long before the term shareholder will be pejorative. Showing good earnings and paying them to anyone other than the taxman or the labour force may be unpopular until growth returns.
Governor Mboweni will have spent much of the week showing his successor, Governor-Elect Marcus around the executive suite at the top of Reserve Bank Towers. Not only is there the boring work-related stuff like a shelf to hold books, a drawer for your pencils, the Rates Up lever and the Rates Down pedal, there is the private lift and en-suite dressing and bathroom to explore. Ever thoughtful, Tito has already arranged for the wardrobes to be adjusted to provide extra hanging space for Gill’s kaftans. Reportedly however, the highlight of the tour was a demonstration of the secret system that alerts the incumbent to the arrival of fresh baked goods in the staff canteen 12 floors below.
When suits begin to squabble amongst themselves and use the word “disrespect”, one can be certain that one bunch must have pocketed incentives that the others thought that they should have shared. SA Cricket’s alleged but clearly unsuitable “boss” says that there is no force big enough to make him change his mind about dropping Wanderers from this summer’s list of venues. Just how much respect does this show for the paying spectators?
Apparently a seismic event has moved New Zealand a little to the left on the globe in the last few days. That means it is now closer to SA. So we don’t want to hear anything about travel fatigue from the All Blacks when they are looking for excuses after the Test in Bloem tomorrow.
James Greener
24th July 2009.
